Wouldn’t it be wonderful if the holiday season became more widely known as “The Giving Season?
By Alice Wood, JD, Director of Gift Planning, Dupage Foundation
In the world of philanthropy, this is a make-or-break time of year for many of the not-for-profits in our area. DuPage Foundation was created with a single purpose: to raise the quality of life throughout DuPage County and help people give efficiently and effectively to the causes that matter most to them throughout the year. Doing a world of good in our own backyard® is what we’re known for and everyone is invited to join us in supporting the great work of the many not-for-profit organizations serving our community. Matching interests and resources with opportunities to make a difference for those in need is the cornerstone of our work. If you find yourself in a position of wanting to give back but aren’t sure where to start, are looking to streamline your giving, or are wanting to make your giving go further
through coordinated impact, we can help.
As you consider your year-end giving intentions, here are some strategies to keep in mind to maximize your impact and potential tax benefits: 2021 CAA Incentives – The extension of several charitable giving incentives from the 2020 CARES Act into 2021 as part of the Consolidated Appropriations Act (CAA) offers several opportunities for all types of donors. Gift Appreciated Assets Held for a Year or More to a Qualified Charity – This allows those who itemize to receive a potential charitable deduction for the fair market value of the donated assets (up to 30 percent of their AGI) while potentially eliminating the capital gains taxes they would otherwise incur upon the assets’ sale. While some people may think the right thing to do is to sell investments such as highly appreciated stocks and then donate the proceeds, the better strategy is to donate the assets directly to charity. See the following comparison: Option 1 – Selling appreciated assets and then donating the cash to charity (less optimal) Donors (who itemize their tax deductions) sell appreciated stock for $100,000 in order to make a donation to their favorite charity. They had purchased the stock for $15,000 several years earlier and are now subject to a 20 percent capital gains tax based on their income level. Long-term capital gains liability: $17,000 Charitable contribution and tax deduction: $83,000 Tax Savings: $19,920 (assuming a 24 percent income tax bracket) Option 2 – Donating appreciated assets directly to a charity (optimal) Donors give the same appreciated stock valued at $100,000 directly to their favorite charity.
Long-term capital gains tax liability: $0 Charitable contribution and tax deduction: $100,000 Tax Savings: $24,000 (assuming a 24 percent income tax bracket) Note that Option 2 provides an additional $17,000 to the charity and saves the donors an additional $21,080 in taxes. *This illustration is only an example and does not take into account any state or local taxes or the Medicare net investment income surtax. Consult your tax and financial advisors before making any significant charitable gift. Make Qualified Charitable Distributions (QCDs) from Your IRA – Another great option for maximizing your charitable impact while minimizing your income tax liability is to make Qualified Charitable Distributions (QCDs) from traditional and other types of IRAs to qualified charities. QCDs are available to individuals who are 70 ½ and older and count essentially as tax free charitable gifts. Once you reach the age of 72, QCDs can also be counted toward your IRA Required Minimum Distributions (RMDs). You will not receive a tax deduction for making such gifts but they will lower your AGI, thus reducing your tax liability. . Open a Donor-Advised Fund – Donor-Advised Funds (DAFs) are an excellent tool to make a charitable gift now and receive an immediate tax deduction while retaining the flexibility to give to your favorite charities of choice over time. A DAF is generally every bit as impactful as creating a private foundation but will save you the time, expense and headaches of the ongoing administrative responsibilities that go along with maintaining a private foundation. Opening a DAF through DuPage Foundation is simple and can be done by contacting any member of our Advancement team. Once in place, your fund will be invested to grow and you will be able to recommend grants to any qualified 501(c)(3) charity of your choosing, locally or nationally. You may also designated family or other loved ones as successor advisors for your fund to continue its impact. Combine Two or More Years of Giving Into One through Gift Bunching – This is a great strategy to consider if you are “on the bubble” between itemizing and taking the standard deduction in a given tax year.
By “bunching” or combining the charitable donations you typically make over one or more years into a single tax year, you can essentially “front-load” your giving to itemize your deductions for a given year to potentially enjoy greater tax savings, and then take the standard deduction in subsequent years until you are ready to repeat the process. Many people utilize this strategy in conjunction with adding to their donor-advised funds. Give Through Your Estate Plan – Not all gifts need to be made right now. Consider creating an impactful legacy by naming one or more of your favorite charities as a beneficiary of your will, trust, life insurance policy, retirement fund, or other account. You can also partner with DuPage Foundation to support your community and one or more favorite causes (local and national) through us. DuPage Foundation is your community foundation and the leading philanthropic organization in DuPage County. Established in 1986, we manage more than $125 million in assets and have awarded more than $60 million in grants to not-for-profit organizations serving the residents of DuPage County and beyond. Individuals and organizations seeking to provide impactful support in DuPage County to address critical issues can create powerful customizable gift solutions and partnerships through DuPage Foundation. If you wish to make the most of your charitable giving, please contact us at 630.665.5556 or visit www.dupagefoundation.org for ways you can help SEE MORE IMPACT this “Giving Season.”
